Q4 Investment Activity Surged 97% from Q3;
Annual Volume Down 34% from 2019
- Q4 investment volume1 increased by 97.2% from Q3 to $135.4 billion, indicating a strong resurgence of investor confidence. On a year-over-year basis, however, Q4 volume was down by 21.0% and 2020 annual volume fell by 34.1% from the record high of 2019. These declines are expected to moderate further as economic recovery gains momentum and vaccine rollouts lift market sentiment.
- Capital is increasingly allocated to multifamily and industrial assets, which combined made up 66.3% of total investment in Q4. Multifamily and industrial investment volumes fell by 2.1% and 1.3%, respectively, year-over-year in Q4 and by 28.8% and 16.0% on an annual basis.
- Office investment improved in Q4 but was 33.5% lower than a year ago. On an annual basis, office, retail and hotel investment decreased by 40.2%, 44.0% and 70%, respectively, taking hard hits from the COVID-19 pandemic.
- Cross-border investment returned to pre-pandemic levels in Q4, with $141.5 billion of transactions, accounting for 10.1% of total investment. The majority of cross-border capital came from Canada, South Korea and Germany
- Multifamily and industrial cap rates continued to compress due to strong market fundamentals and investor demand, while cap rates for CBD office, retail centers and full-service hotels increased by approximately 50 bps from Q4 2019.
- The total annual NCREIF return slowed further in Q4 to 1.6% but remained positive, unlike during the Global Financial Crisis. The income return stayed at 4.2% and more than offset the -2.5% total asset depreciation. Nevertheless, industrial asset appreciation remained high at 7.0%.
1 All references to deal volume cited in this report are based on Real Capital Analytics transactional database, which includes entity-level and excludes development site transactions.